Cons of Foreign Aid

Updated on February 26, 2016

Introduction

Foreign aid is required for building healthcare, education, security and even infrastructure of an underdeveloped or developing country. If any form of foreign aid is taken for self development, for creating market based systems, for job creation and for coming out of poverty, it is worth taking the aid.

Many third world countries prospered through foreign aid and are now considered as developing nations of the world. Some of them include Egypt, Israel, Taiwan, Malaysia, Korea and India (Alesina & Dollar, 2002). However, the political system in Africa is often headed by leaders who are corrupt. This has forced many African nations to endlessly depend on foreign aid. Foreign aid often provides continuous growth and poor nations taking foreign aid needs to reduce the need over a specified time limit. Complete dependency on foreign aid should be avoided and for economic recreation, African countries should implement plans such as Green revolution of India or Marshall Plan of Europe.

Aid for Continuous Growth

The global funds are provided to impoverished countries and governments to fight TB, AIDS, and malaria, for immunization and vaccination also. This helps to save lives of millions of people at a low cost. Foreign aid can help a country to build sustainable strategies for creating jobs and becoming self dependent. Out of $100 of US income, only 5 cents is given as foreign aid and more than $10 is given as stimulus packages, for bank bailouts and around $5 is given for military (Boone, 1996). Rwanda is completely dependent on foreign aid and 70% of the government budget comes in the form of funds provided in foreign aid.

Tied Aid Creates Dependency

Tied aids provided by developed countries make African countries spend majority of the aid in buying the products sold by the aid providing nations, which means the country providing the aid forces the receiver of aid to buy products or goods from them. This type of aid is not helpful in enhancing development of a country, instead it creates forceful dependency.

Aid not Helping in Development and Job Creation

More than 60% of Africans are below the age of 24 years who require jobs to work for themselves (Boone, 1996). After so many years of taking aid, African countries are still in poor condition suffering from poverty and diseases, and in certain regions, the condition is worse as compared to 40 years back. Today 70% of the sub-Saharan Africans are living on less than $2 per day while in 1970, less than 10% of people were living below poverty (Prokopijevic, 2006). This shows the condition of people has not improved through foreign aid. If both the donor and the recipient define purposeful and sensible aid strategies, it can be beneficial to take; otherwise denying aid is completely justified.

Aid Giving Nations Facing Recession and Unemployment Issues

Today the US is facing 10% of unemployment, its hit all its sectors, such as tourism, infrastructure, media and movie industry, education and housing. The economy of aid donor countries is in poor shape as well (Leeson, 2008). Hence, the African countries should try to develop independently, and not rely on aid which is the money of the taxpayers of developed countries.

THE FOREIGN AID PARADOX

Conclusion

Today, African countries are tied to open ended commitments and there is no end to the situation of taking aid in the current situation. African governments do not possess incentives to get better ways of development and growth. The foreign aid strategy often creates dependency, and increases debt burdens, which should be denied (Prokopijevic, 2006). The main benefit of aid is long term development and if any form of foreign aid is not able to provide long term development, it should not be taken. Long term development can only happen if private sector investments comes to the country and free market solutions are created. In a nutshell, foreign aid is a bane and not a boon for underdeveloped countries, as foreign aid does not create sustainable development.